Many people will know Jerome Powell as President of the US Federal Reserve. But who is the most powerful central banker in the world whose word has an impact on global financial markets?
Lawyer with economic competence
Jerome “Jay” Powell was born in Washington DC in 1953. He graduated from Princeton University in 1975 with a degree in political science and then studied law at Georgetown University, graduating in 1979. Unlike many of his colleagues, Powell does not have an academic background in economics; Lawyer – something he has in common with Christine Lagarde, the President of the European Central Bank, shares. He is the first president of the Federal Reserve (Fed) in 40 years who does not have a doctorate in economics.
Powell began his public service career in the administration of President George Bush Sr., where he served as deputy secretary and undersecretary of the Treasury. In this position, he was responsible for the development and implementation of financial policies related to financial institutions, the government bond market and related areas. Before working in government, Powell had a successful career as a lawyer and investment banker in New York City. His ability to combine legal expertise with economic understanding made him a respected expert in the field of financial policy.
Cross-party recognition
In 2012, Powell was elected president Barack Obama appointed to the Fed Board of Governors. Although Powell belongs to the Republican Party, President Obama chose his nomination. Normally a president prefers candidates from his own party, but the Democrat Obama recognized Powell’s professional qualifications and appointed him despite the partisan differences.
In February 2018, Jerome Powell was appointed by then US President Donald Trump to the successor of Janet Yellen appointed as chairman of the Fed. At the same time, he assumed the position of chairman of the Federal Open Market Committee (FOMC), the Fed’s main monetary policy body. Powell was originally appointed to a four-year term. Under the administration of the current US President Joe Biden, Powell was subsequently sworn in for a further four-year term in May 2022. This reappointment is another example of cross-party recognition of his professional expertise and experience.
Fighting inflation in the spirit of Paul Volcker
Under Powell’s second term, the U.S. economy is facing high inflation rates, which reached 9.1 percent in June 2022, their highest level in 40 years. In recent months, however, the US inflation rate has moved closer to the Fed’s target of two percent. Powell played a key role in combating inflation, whose decisive action by drastically raising key interest rates at a record pace earned him a reputation as a fearless inflation fighter.
With his resolute approach, Powell is very much in the light of former US Federal Reserve Chairman Paul Volcker, whom he admires and whom Powell once described in a recent congressional hearing as the “greatest public servant of our time.” Volcker, who plunged the US economy into recession twice in the early 1980s by drastically raising key interest rates to 20 percent in some cases, but thereby managed to tame the high inflation rates of over 14 percent in some cases, is considered the epitome of the intrepid conqueror of inflation, who does not shy away from economic and political sacrifices in order to restore the credibility of the central bank.
So far, it looks as if the “soft landing” promised by Powell is still possible without major economic losses. Although there are signs of an economic slowdown and the US economy slowed in the first quarter of 2023, a recession has so far been averted. However, problems are beginning to emerge in the US banking sector. It remains to be seen how Powell’s anti-inflation strategy will affect the US economy in the long term and how the lawyer will go down in US history.
C. Kusche/editorial team finanzen.net